Navy arms buyer sees funding challenges for shipbuilding

WASHINGTON Tue Sep 11, 2012 7:54pm EDT

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WASHINGTON (Reuters) - The U.S. Navy will run out of money in January or February for the refueling of the USS Theodore Roosevelt aircraft carrier, unless Congress enacts a special measure to allow the work to continue, the Navy's top arms buyer told lawmakers on Tuesday,

Sean Stackley, assistant secretary of the Navy, outlined a series of funding problems facing Navy shipbuilding, including Congress' failure to pass a budget for fiscal 2013, which begins October 1, and automatic additional spending cuts to start taking effect in January.

The budget crisis threatened to delay shipbuilding programs and raise the cost of several shipbuilding programs, but could also undermine ongoing efforts to stabilize orders for U.S. shipbuilders and their suppliers, Stackley told a House Armed Services subcommittee hearing.

President Barack Obama and lawmakers have until the end of the year to resolve a number of fiscal issues, including whether to renew expiring income tax cuts for tens of millions of Americans, and how to avert $109 billion in automatic budget cuts under "sequestration," of which half would hit defense.

Stackley said sequestration would result in an estimated 10 percent cut to shipbuilding accounts, jeopardizing the Navy's ability to put all the ships planned under contract in fiscal 2013, barring approval of additional funds.

"There's an operational impact, there's a cost impact, there's disruption at the shipyard impact," he said, adding, "The shipyards are going to have to make some adjustments in terms of their capacity, their level of efficiency, given the near- and longer-term projections," Stackley said.

He said his greatest concern focused on aircraft carriers, which are built and refueled by Huntington Ingalls Industries. He said the Navy was working closely with Congress to ensure continued funding to complete the Roosevelt refueling and complex overhaul (RCOH), which is due to be done by next June.

U.S. lawmakers are expected to pass a continuing resolution, or six-month temporary funding measure that will extend fiscal 2012 spending levels through March 2013.

Since fiscal 2012 already did not include funding for the Roosevelt refueling, lawmakers would need to enact a special measure that allowed the Navy to spend the additional $135 million needed to complete that work, Stackley said.

Another specific measure would be needed to allow work to start on a new project, the refueling of CVN 72, the USS Abraham Lincoln, Stackley said, noting that temporary funding measures typically ban funding for any new projects.

The House Appropriations Committee on Monday unveiled a continuing resolution that did not include either measure for the carriers. Lawmakers are reluctant to include individual program fixes for fear of opening the floodgates for a whole series of such measures, according to congressional aides.

A similar situation occurred in 2005, requiring Congress to pass stand-alone legislation, Stackley noted.

The former congressional aide also aired concerns about the long-term outlook for amphibious ships built by Huntington Ingalls, and auxilliary ships, built by NASSCO, a unit of General Dynamics Corp, given possible gaps in shipbuilding orders in future years.

"We have to start planning for it today so that we don't go down some irreversible path in the meantime that would harm our industrial base," he said.

Stackley said the Navy also faced possible shortfalls in paying for maintenance of existing ships, given that some of that work has been funded in recent years by a special wartime supplemental budget. The Pentagon now plans to wind down the wartime budgets and wrap those costs into the base budget.

(Reporting By Andrea Shalal-Esa; Editing by M.D. Golan)

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